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Meta stock jumped more than 7% Tuesday on a Bloomberg report that the company is building a new business to sell excess AI computing capacity to outside customers\u2014a move that would put it in competition with AWS, Microsoft Azure, and Google Cloud. But Mark Douglas, president and CEO of connected-TV ad platform MNTN and a regular commentator on tech and media strategy, thinks the more interesting story isn\u2019t Meta at all.<\/p>\n
Douglas\u2019s critique wasn\u2019t about Meta\u2019s strategy. It was about the economics of building AI infrastructure in the U.S. at all, a dynamic he thinks investors are underpricing.<\/p>\n
\u201cI think data center capacity in the United States is not going to age well,\u201d he told Fortune<\/em>. \u201cIt\u2019s one of the most expensive places to build out that kind of capacity, and a lot of communities don\u2019t want it. I think literally two years from now, those data centers are not going to be very attractive.\u201d<\/p>\n The competition, in his view, is coming from an unexpected direction: sovereign-wealth-backed capacity in the Gulf. \u201cThe Kingdom of Saudi Arabia is coming online with massive data center capacity, hosted out of Saudi Arabia, at significantly lower prices\u2014because why pump oil out of the ground and ship it overseas in tankers when you can use it here to power massive data centers?\u201d he said, citing Saudi Arabia\u2019s Public Investment Fund, one of the world\u2019s largest sovereign wealth funds. \u201cIf I were an investor, no way would I invest in companies building out hyperscaling in the United States right now.\u201d<\/p>\n Douglas added that some Gulf data centers are being structured as legal extraterritorial zones\u2014effectively data \u201cembassies\u201d\u2014so multinational clients with strict data-residency rules can use them without technically moving data outside their home country. \u201cPeople are focused on putting data centers in a cornfield in Indiana, where no one wants it and it\u2019s very expensive,\u201d he said. \u201cMeanwhile, that story hasn\u2019t really been told.\u201d<\/p>\n Douglas said he was skeptical of the specific plan Bloomberg described\u2014selling excess AI compute the way AWS, Azure, and Google Cloud do. \u201cIt doesn\u2019t make a lot of sense unless you really want to put your name in the back of the AI space\u2014just basically get attention,\u201d he said. \u201cWhich the announcement is definitely doing. So part of me wonders: Is that today\u2019s headline, but tomorrow\u2019s reality?\u201d<\/p>\n Douglas, who spent years as a coding engineer before founding a series of startups, said the plan echoes what SpaceX and xAI have done with their own data centers\u2014building capacity and renting it out to a small number of massive buyers, like Anthropic. That\u2019s a fundamentally different business than the one Meta is reportedly eyeing.<\/p>\n \u201cThere\u2019s not many companies that can just take raw data center space and put it to use,\u201d Douglas said. \u201cSo there\u2019s a very limited number of customers for that. And if you\u2019re going to rent it like AWS\u2014well, now that\u2019s a very competitive market: AWS, Google Cloud, Azure.\u201d<\/p>\n He was also skeptical that the pivot fits Meta\u2019s core business at all. \u201cGoing from 3 or 4 billion social media app users to 10 customers buying data center capacity from them\u2014that just doesn\u2019t seem like a good fit,\u201d Douglas said. \u201cBut again, we\u2019re sitting here talking about it, which maybe is the point.\u201d<\/p>\n Douglas argued the market\u2019s instinct to reward a well-known company for entering a new business (Meta\u2019s stock rose on the report alone) undersells how difficult that pivot actually is.<\/p>\n \u201cThere\u2019s often this assumption that if a company that\u2019s successful in one area announces they\u2019re going to enter another area, that\u2019s an automatic success,\u201d he said. \u201cIt doesn\u2019t matter what size you\u2019re at\u2014it\u2019s really, really hard to build a new company from scratch, or a new product line, or new revenue, even when there\u2019s proven product-market fit. Meta\u2019s been prolific in going after areas like this\u2014Threads being one example\u2014and they just keep running into it.\u201d <\/p>\n Part of the problem, he said, is the labor force\u2014\u201cthe talent that knows how to build something from scratch usually doesn\u2019t work for a big company like Meta. They\u2019re usually building their own startups.\u201d<\/p>\n Despite his skepticism about the cloud pivot specifically, Douglas said he remains bullish on Meta\u2019s broader AI strategy, particularly its open-source models, and what it means for advertising, even as investors have grown anxious about whether the spending is paying off.<\/p>\n \u201cI\u2019m actually pretty bullish long-term on Meta in terms of AI models and Llama overall,\u201d he said. \u201cI think Meta has the capital, the desire, and the ability to recruit to ultimately do quite well\u2014especially since they\u2019re building and training those models on massive amounts of data and are motivated to make them available at attractive prices. That\u2019s going to benefit their ads business, and it\u2019s going to benefit the ads business generally.\u201d Douglas said MNTN is already in conversations with AI companies about partnering on advertising-specific models for targeting.<\/p>\n \u201cConsumers pay for everything, companies pay for nothing unless they\u2019re not profitable,\u201d he said. \u201cThe better these models can predict who wants to buy what, the lower the cost of the products are. If you make marketing more efficient, that goes back to the consumer in lower prices.\u201d<\/p>\n Does having a compute-selling business make Meta look more like Amazon or Microsoft (two diversified infrastructure players that are less reliant on advertising)? Douglas said it\u2019s the opposite.<\/p>\n \u201cPeople believe this year Meta will become the world\u2019s largest advertising company. They\u2019re already the world\u2019s largest social media company,\u201d he said, noting the technical feat of inferring user intent from behavior rather than search queries, the way Google does. \u201cTaking a detour toward AI infrastructure\u2014I think it is a detour. It\u2019s not a major strategic move. It\u2019s a tactical move. And all tactical moves have a beginning and an end. I think this one probably would too, if it comes to fruition.\u201d<\/p>\n<\/div>\n #Metas #cloud #compute #dreams #opt #U.S #data #centers #Saudi #Arabia #cheap #oil #cheaper #power<\/p>\n","protected":false},"excerpt":{"rendered":" Meta stock jumped more than 7% Tuesday on a Bloomberg report that the company is building a new business to sell excess AI computing capacity to outside customers\u2014a move that… <\/p>\n","protected":false},"author":1,"featured_media":10329,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[12157,2341,1097,4355,1271,1269,7439,343,4107,362,400,368,280,12156,2617,8984,599],"class_list":["post-10328","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance-news","tag-arabia","tag-centers","tag-cheap","tag-cheaper","tag-cloud","tag-cloud-computing","tag-compute","tag-data","tag-dreams","tag-mark-zuckerberg","tag-meta","tag-metas","tag-oil","tag-opt","tag-power","tag-saudi","tag-u-s"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/10328","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10328"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/10328\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/10329"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10328"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10328"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10328"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Does selling cloud even fit Meta\u2019s business?<\/h2>\n
A pattern of swings<\/h2>\n
Meta\u2019s ad business<\/h2>\n